Lemon Tree Hotels (LEMONTRE) is the largest hotel chain operator in the mid-priced hotel segment in India. It manages 5,342 rooms across India through its three brands: (i)Lemon Tree Premier (LTP) -catering to the upper-midscale segment, (ii) LemonTree Hotels (LTH)- for the midscale segment, and (iii) the Red Fox Hotel (RFH) -targeted towards the economy segment.

Lemon Tree Hotels Ltd. (LTH), incorporated in 1992 is the largest mid-priced hotel sector chain, and the third largest overall, on the basis of controlling interest in owned and leased rooms. Delhi based LTH is the only integrated hospitality company which operates in the mid-priced hotel sector in India, which operates with end-to-end capabilities across the value...

Lemon Tree Hotels (LTHL) has announced the acquisition of a 100% stake in Keys Hotels directly/through its subsidiaries. The company has signed a non-binding term sheet with Berggruen Hotels Private Limited - a company owning and operating Key Hotels under various...

Lemon Tree Hotels reported a net profit of Rs139mn in 3QFY19, up 112.7% QoQ and 34% YoY. The growth in earnings was because of: 1) ARR (average revenue per room)rising 4.8% YoY and 13.4% QoQ from Rs4,262 in 3QFY18 and Rs3,939 in 2QFY19 to Rs4,465 in 3QFY19. 2) Addition of 775 rooms on YoY basis and 292 rooms on QoQ basis, an increase of 17.2% YoY and 5.8% QoQ. 4) Rise in other income from Rs1mn in 3QFY18 to Rs24mn in 3QFY19. We have retained our Buy...

We are now compelled to downgrade LTHL to Neutral with a TP of Rs 68 (30x EV/e on Dec-20E on proportionate ownership). Lemon Trees (LTHL) 3QFY19 performance was in-line but weak. Revenue/EBITDA grew by 8.3/14.5% YoY to Rs 1.43/0.49bn. PAT of Rs 125mn was up by 34% YoY owing to higher other income. Modest 4.8% ARR growth and flat RevPAR YoY were key negatives.

We had a meeting recently with the management of Lemon Tree Hotels. The key takeaways are as follows: 1. Occupancy rate and ARR continue to improve. 2. Strong room addition primarily through management contracts. 3. Changing mix of guests to aid ARR growth. 4. Negative working capital helps in keeping the balance sheet healthy. We have retained Buy rating on the stock with a target price of Rs92. Occupancy rate and ARR continue to improve: Hotel industry is not only a cyclical business, but also a seasonal business. The management informed us that the occupancy rose from 78% in 2QFY19 to around 79% in 3QFY19. In some markets the...

Lemon Tree Hotels reported a net profit of Rs61mn for 2QFY19, up 204.5% QoQ, and against a loss of Rs70mn in 2QFY18. The growth in earnings was because of: 1) Rise in ARR (average revenue per room) from Rs3,626 in 2QFY18 to Rs3,939 in 2QFY19, up 9% YoY. 2) Rise in occupancy rate by 230bps to 78.3% in 2QFY19 compared to 76% in 2QFY18. Rise in ARR and occupancy rate led RevPar (Revenue per available room) to increase by 12% to Rs3,083 in 2QFY19. 3) Addition of 565 rooms since 2QFY18 - 458 rooms added under management contract and 107 rooms added under the owned and leased portfolio. 4) Rise in other income from Rs2mn...

We believe that the industry leaders like Indian Hotels (IHCL) in luxury segment (five star and above) and Lemon Tree (LTHL) in mid-market segment (2-star to 4-star) with their superior execution capabilities are best placed. Initiate BUY on Indian Hotels with TP of Rs 150 @ 20x Sep-20E EV/EBITDA in-line with its historical average and Lemon Tree with TP of Rs 86 @ 30x Sep-20E EV/EBITDA owing to its superior growth. Notable trends are evolving in the Indian Hospitality sector that are likely to provide attractive opportunities for long term investors. These include (a) robust demand with occupancies at ~64-66% in FY16-18 vs. 59% over FY09-15. Demand in the near term is projected to outpace supply thereby improving occupancies to 68-70%.

Lemon Tree Hotels reported a net profit of Rs22mn for 1QFY19, down 80.9% QoQ and up from a loss of Rs31mn in 1QFY18. The decline in earnings on QoQ basis was because of: 1) Decline in other income from Rs78mn in 4QFY18 to Rs19mn in 1QFY19. However, on YoY basis the company reported positive earnings on account of: 1) Rise in ARR (average revenue per room) from Rs3,373 in 1QFY18 to Rs3,899 in 1QFY19, up 15% YoY. 2) Rise in occupancy rate by 336bps to 76.8% in 1QFY19. Rise in ARR and occupancy rate led RevPar (Revenue Per Available Room) to increase by 19% to Rs2,994. 3) Addition of 678 rooms since 1QFY18. 572 rooms have been added under management contract and 106 rooms have been added under the owned and leased...